Markets: City looks for cheer from Whitbread and Berkeley

HOSPITALITY giant Whitbread should bring some cheer to the market with a positive update this week, while housebuilder Berkeley is expected to outperform the construction sector.

Whitbread's combination of coffee, through its Costa brand, bed and breakfast, though budget hotel chain Premier Inn, and dinner through its pub restaurants has proved a winner.

The Dunstable-based group plans to build on the success with a roll-out of its outlets that will see the number of Premier's rooms rise by 50 per cent over five years, while Costa cafe numbers could nearly double to 3,500 as it expands internationally.

City analysts expect an upbeat first quarter trading update on Tuesday even though sales growth is likely to be more subdued than last year.

In April, the group, which employs 35,000 people in the UK, said like-for-like sales for the first eight weeks of the current year remained "firmly positive", which brokers have interpreted to mean about 2 per cent growth.

US broker Morgan Stanley predicts Whitbread will be in line to hit its profits target of 308 million, and said that if there are no further forecast downgrades following the trading update, it should be "a positive catalyst for the shares".

Berkeley's focus on upmarket developments in London and the Home Counties has enabled it to sail through the worst of the housing crisis.

In April, it said a 25 per cent jump in sales reservations over the winter had boosted its confidence in results for this year, which it forecast to be at the high end of market estimates.

The update prompted broker Numis to upgrade its profits estimate for 2012 by 14 per cent to 16m, adding that earnings were on track to double between 2010 and 2014, rather than its previous forecast of a five-year time frame.

Housing reports recently have shown London remains buoyant, helped by overseas buyers, but it is bucking the trend elsewhere and Berkeley's comments on Friday will be watched for any change in its view of the market or forward sales number, which stood at more than 800m recently.

Numis expects earnings per share for the year to April to rise from 60p to 73.4p following the final results.

The news from PC World and Currys parent Dixons Retail is likely to be less positive. On Thursday it is expected to post profits of between 80m and 86m for the year to 30 April, compared with 90.5m the previous 12 months. The company has issued profits warnings twice this year.

HMV Group is expected to gain shareholder approval on Thursday to sell its book chain Waterstone's for 53m in a crucial deal for the struggling retailer. HMV needs its investors to back the sale to Russian billionaire Alexander Mamut to secure a 220m banking facility covering the next two years.The new package will see its lenders, including taxpayer-backed Lloyds Banking Group and Royal Bank of Scotland, issued with warrants worth 5 per cent of the company.

Mamut plans to appoint former investment banker James Daunt to lead Waterstone's, in the hope it can emulate the success of his London-based chain Daunt Books. Waterstone's saw an 11.3 per cent fall in sales over the 17 weeks to 30 April as ebooks, such as Amazon's Kindle, continued to eat into the traditional bookstore market.